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Going Offshore In Botswana

Botswana is a little-known jurisdiction that is open for the international offshore finance business. I've recently been on a fact-finding mission there and have prepared the following summary about Offshore Bank Account Opening in Botswana for non-residents. I also cover International Companies in Botswana and Residence in Botswana, as well as the tax situation in Botswana as it affects non-residents.

Surrounded by the Republic of South Africa, Botswana is quietly becoming an international hub for investment, banking and residence. The capital city Gaborone has only 300,000 inhabitants, making it one of the world's smallest capital cities.

However what I really like about Botswana is that the government is stable, crime is low and the processes to get things done are very streamlined. The people are friendly and helpful. English is the official language and the temperature is comfortable. Most nationalities can enter Botswana with no need for a visa. The only way to enter Botswana is via Johannesburg by plane, or overland passing through South African territory, in which case you must have proper documents for South Africa.

The biggest negative here is the shortage of both residential and commercial real estate, making it expensive to purchase property or rent office space.

The following report will describe the process for company formation, banking and residence.

COMPANY FORMATION

It is very easy to form a company in Botswana. Once the name has been selected you must register the company with the corporate registry. This is immediate. You must then apply for a tax number. This is straightforward and takes 3 business days.

Any company in Botswana must have at least one local director. A registered office and mailing address is also required.

Branches of non-resident companies require the same process for registration, except that the process for registration takes one day instead of being immediate. A local director is not required.

TAXES IN BOTSWANA

Botswana has developed a structure that allows companies to reduce their tax burden. The Botswana Investment and Trade Centre (BITC) has been created and is mandated to promote and facilitate foreign direct investment into Botswana as well as domestic investment in various sub-sectors. The Botswana International Financial Services Centre (IFSC) works in conjunction with the BITC and was created in 2003 to establish and develop Botswana as a world-class hub for financial and business investments into Africa and the region. The IFSC is strictly regulated, but offers strong tax advantages compared to the local company structure. IFSC companies are exempt from Capital Gains and withholding taxes as well as having a zero-rated Value Added Tax, compared to a 15% tax on local companies for capital gains and withholding, and 10% VAT. The corporate tax rate is 15% for IFSC companies compared to 22% on local companies.

To qualify for IFSC status, you must submit a very strong business plan. A holding company in Botswana must be created as a part of the structure. A commitment letter for a minimum of BWP 5,000,000 (approximately EUR 412,000 at current rates) is required along with audited statements and a strong proof on source of funds.

This may not be for everybody: perhaps a simple local company or non-resident company will be sufficient, but this vehicle will allow qualified candidates to take advantage of the rapidly growing market in Botswana. On note: this process can take up to 3 months for approval. This is due to the IFSC board of directors meeting 4 times per year, January, April, July and October.

BANKING

The best thing about operating in Botswana is the banking. Account opening is straightforward. A simple application form along with the corporate documents in English are basically what is needed. As stated earlier you must also have a local director and a proof of address for the company. This can be provided of course for a fee.

Multi-currency accounts are allowed and there are no exchange controls. You can transfer money into Botswana and take out in cash in any currency. There are no restrictions on the jurisdictions of the UBO's and directors. There currently are no restrictions on jurisdictions for transfers, making this a very good destination for CIS, Venezuela and other high-risk countries.

A personal visit is required. Most banks operate their internet banking via sms messaging, so it is advised to buy a local SIM card for this. ABSA (formerly Barclays) is one bank that uses a token, so a SIM card is not necessary in this case.

There are 2 slight downsides for banking: The e-banking (except in 1 case below) usually takes 3 days to set up. The other is that the opening deposit must be made immediately when the accounts are opened. So you will need to bring cash with you to deposit after the accounts are set up. If you have a USD and EUR account then you must make the deposits into those accounts as well. You can simply deposit the equivalent in BWP and they will transfer the amount from BWP into the foreign currency. Minimum amounts are from BWP 1000 for the Pula account, to 250 - 500 of the foreign currency. The exception is Standard Chartered Bank, where the opening deposit is BWP 10000, EUR 1000, USD 1000, other currencies 1000, so they will accept a wire transfer.

There is a good mix of local and international banks operating here. The international banks that are here include ABSA (formerly Barclays), Standard Chartered, Bank of Baroda, Bank of India.

We have identified a local bank that will open a multi-currency account and provide internet banking in 1 day. If you want a debit card then this will take an additional 4 days. The larger banks will take from 2 - 3 weeks to open an account due to the slower compliance processing, but they will open accounts.

We have a special situation for non-resident accounts. We have identified one bank that will open a straight non-resident account without a local director being required. Compliance takes 48 hours after document submission. Documents will need to be apostilled and the director passports must be certified.

Personal accounts are not possible unless you have residence in Botswana.

RESIDENCE

Residence and work-permit processes take about 3 months to complete. The process is straightforward and the basic documents will be needed:

Corporation papers, lease agreement for the company, CV, list of assets, current bank statement, medical exam, certified copy of passport and birth certificate

Non-working spouses, children under the age of 25 and adults over 65 are included with the main applicant. A work permit is not needed for them, but they will receive a residence permit.

Fingerprints are mandatory, and the applicant must appear in person on the day that the documents have been submitted along with your passport. The same day you will sign the application form in front of the Commissioner of Oaths. This can take from 2 - 5 hours to complete, so allow 1 day for this.

The applicant must remain outside the country during the application process.

Your permit will be cancelled if you remain outside the country for more than 6 months after the permit has been issued.